LOccitane can borrow in the Europound market at a pre-tax cost of 6 percent. International...
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LOccitane can borrow in the Europound market at a pre-tax cost of 6 percent. International investors will tolerate a 50% debt-to-value mix. At that ratio, the beta of LOccitane is 1.2 against the MSCI world index. The risk-free rate in France is 5 percent and the market risk premium over the risk-free rate is 8 percent. Interest is deductible in France at the marginal corporate income tax rate of 35 percent. a. What is LOccitanes WACC under these circumstances? [10 points] b. Would your answer be different had France been segmented from the world market and its beta relative to the French CAC Index is 1.5
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